Junior Gold Miner Seeker: Torex - Morelos Gold Project BFS and raise $350m

Thursday, 4 October 2012

Torex - Morelos Gold Project BFS and raise $350m

Torex (TXG.TO) have demonstrated that there is an appetite for investment in junior gold developers with a fund raising for $350m to progress mine development for production by the end of 2015, hitting 375k oz pa production by 2017. This follows on from their recent Bankable Feasibility Study (BFS)

Hitting $2bn NPV at $2000 gold there is limited leverage to the current $800m market cap.

However this is seen as a safe project, relatively low capex and high margin due to the 5m oz deposit being relatively high grade.....

This was 15th in BMO's list of 76 potential gold mines
http://juniorgoldminerseeker.blogspot.co.uk/2012/09/bmo-76-new-gold-mines-2012-20-emerging.html

Torex Fundraising
http://www.torexgold.com/s/NewsReleases.asp?ReportID=550699

The company released a bankable feasibility study (BFS) in September
http://www.torexgold.com/s/NewsReleases.asp?ReportID=545207

Highlights of the BFS (base case using $1,276 / oz LOM average gold price)

Commercial Production Declaration	October 1, 2015
First Year of Full Production	2017
Proven and Probable Mineral Reserves	48.8 mt @ 2.61g/t
LOM Strip Ratio (Waste:Ore)	5.6:1
Mill gold head grade	2.61 g/t
Mill gold recovery	87.4%
Mill silver head grade	4.35 g/t
Mill silver recovery	32.7%
Mine Life excluding production tail	10.5 years
Annual Production 2015	128 koz Au
Annual Production 2016	246 koz Au
Average Annual Production 2017 to 2024	375 koz Au
Peak annual production	494 koz Au
Cash Costs net of Ag revenue excluding production tail	US $421/oz
Capex up to commercial production (without revenue credits)	US $675 M
Capex up to commercial production (including revenue credits)	US $552 M
Capex after commercial production	US $86 M

Project Economics

	US$ 1276 / oz⁽¹⁾ Base Case⁽²⁾	US$ 1500 / oz	US$ 1750 / oz	US$ 2000 / oz
Cumulative Cash Flow (US$M)	$1,558	$2,121	$2,747	$3,374
After Tax NPV @ 5% (US$ M)	$900	$1,262	$1,679	$2,096
After Tax IRR (%)	24.2%	28.9%	34.6%	39.8%
Capex Payback (Years)	3.6	3.2	2.8	2.5
2017 EBITDA (US$ M)(3)	$276	$336	$417	$497

(1) Average gold price LOM
(2) Base case assumed metal prices in US$:
Gold: 2015 - $1,500/oz, 2016 - $1,407/oz, 2017 - $1,315/oz, 2018 and beyond - $1,250/oz
Silver: 2015 - $27.75/oz, 2016 - $25.00/oz, 2017 - $25.00/oz, 2018 and beyond - $22.00/oz
(3) First year of commercial production

An additional resource statement
http://www.torexgold.com/s/NewsReleases.asp?ReportID=550802

Torex's stock held up well for the past year, ~ $800m market cap